VietNamNet Bridge – An additional 26,000 taels of gold was sold at auction on Tuesday, taking the total so far to over 1.19 million taels, or nearly 45 tons.

Gold taels on display at an outlet in HCMC in this file photo. The central bank sold an additional 26,000 taels of gold on July 16, taking the total so far to over 1.19 million taels, or nearly 45 tons.

The entire 26,000 taels put up for auction on Tuesday was snapped up as the floor price equaled the market level. There were 14 bid winners, with the highest winning bid being VND37.31 million per tael and the lowest VND37.22 million.

Saigon Jewelry Holding Co. (SJC) quoted the yellow metal at VND37.35 million per tael for buying and VND37.45 million for selling. With this gold selling price, compared to the highest winning bid, SJC earned a minimum profit of VND140,000 from each tael sold. A tael equals 1.2 troy ounces.

Local and global gold prices moved in opposite directions on Tuesday. Whereas the selling price set by SJC dropped VND130,000 per tael over the preceding day, the price in the European market picked up US$9.1 to US$1,292.3 an ounce.

Thus, the gap between local and global gold prices narrowed to some VND4.3 million a tael, the smallest spread since early May.

Gold is now sold to banks and enterprises for supply to the market. Banks no longer buy gold to return to depositors, so they are required to hold a gold volume less than 2% of their equity at the end of each day, said the central bank.

The central bank will continue gold auctions to prevent speculation, but the volume is seen gradually falling.

Huynh Trung Khanh, member of the World Gold Council and vice chairman of the Vietnam Gold Traders Association, said the central bank would need to sell more gold in the coming time.

“Forty-five tons is a large amount if you look back at the last two years. But if you look at the actual demand of the local gold market, it is just a moderate amount,” he said.

He stressed the gold market had long faced an undersupply, and that the volume having flowed into the market through auctions recently had not satisfied the demand.

“The central bank may import more gold to meet demand,” he predicted. This is the only possible way now to stabilize the market. Once supply was higher than demand, the gap between local and global gold prices would shrink, he said.

As long as the demand remains high, gold could be smuggled into the local market to make up for the insufficient volume of legal imports, he noted.

“Right after the gold import tariff was raised, gold illicitly made its way to India via the neighboring countries,” Khanh said.

He suggested the central bank should review the way it manages the gold market. The fact that gold was sold out after each and every import shipment shows that people have yet to kick the long-established habit of holding on to gold even though the number of gold stores has considerably slid and banks have stopped gold lending and mobilization operations.

It is necessary to forbid banks from mobilizing gold to ensure the liquidity of the system. However, a general thought in the public is that the Government would ban whatever it finds helpless to control, said Khanh.

The central bank often imports gold when the market’s demand rises. However, in the long term, mobilizing gold from the Vietnamese, who possess an estimated US$20 billion worth of gold, is an sustainable solution.

Source: SGT